Newsletter

Report: Alaska health care industry booming

The health care industry is booming in Alaska, and growth will continue. Health care providers pay a $1.53 billion annual statewide payroll with nearly $1 billion of that in the Anchorage and Matanuska-Susitna regions of Southcentral Alaska.

Jobs in health care totaled 31,800 in 2010, up 46 percent in 10 years. The growth rate is five times the rate of the state’s overall population, and three times that of all other sectors of the economy.

New data on health care employment, payroll and its rising cost comes from a report recently released by the Alaska State Hospital and Nursing Home Association, an industry trade group.

The report highlights the contribution health care makes to the state’s economy – $7.2 billion in 2010 – but it doesn’t shy away from the industry’s problems.

Uncompensated care and underpayments cost Alaska hospitals $410 million in 2010, 21 percent of their total costs, a rate almost twice as high as the national average, according to the report.

While much of that was underpayment – Medicare and many Medicaid payments are below hospitals’ actual costs – but $178 million was uncompensated care of patients who just couldn’t pay the bills, the report said.

Karen Perdue, the association’s president, said those unpaid costs get shifted to others and show up in higher bills for those who can pay. It’s one reason why hospital costs are 38 percent above those in a group of comparison states, mostly in the Pacific Northwest, Perdue said.

The bulk of health care employment, 51 percent of the jobs are in 13 hospitals and a large number of nursing homes that operate across the state. Hospitals employ most of these, 40 percent of all health care employment.

What’s also important is that hospitals and medical clinics operate in different regions of the state, which means that that employment and local purchasing is spread statewide.

“It’s easy to see why Alaskans often don’t think of health care as an industry. But it is, and a very strong one. Hospitals are major employers,” Perdue said.

“It’s like a fire station, open 24 hours every day of the year. You love to know it’s there, and you want it staffed with the most competent people and the best equipment. And, you hope you never have to use it,” she said.

Hospitals and other health care providers stimulate the regional economy in a number of ways other than employment. Construction spending for major Alaska hospitals alone was estimated at $305 million for 2011, the hospital and nursing home association said in its report. Major projects were under way in Nome, Anchorage, Fairbanks, and planned soon in Wrangell.

As large employers, hospitals are a magnet for stimulating nearby business development including physicians’ offices and clinics, pharmacies, medical supply outlets and hotels.

In Anchorage, for example, the growth of a community of medical offices and clinics in the Lake Otis Parkway area in midtown Anchorage is related to the presence of the nearby Providence Hospital complex and Alaska Regional Hospital that is not too distant.

Another example: NANA Regional Corp. and its hotel partner, Marriott, built a new Marriott on Tudor Road mainly for families of patients visiting the nearby Southcentral Foundation clinics and Providence, both nearby.

Health care does cost more in Alaska than in other states, however. In a study finalized in late 2011, the Alaska Health Care Commission found Alaska hospital costs 38 percent above those in an average of six comparison states, which included Washington, Oregon, Idaho, Wyoming, North Dakota and Hawaii.

Physician costs in Alaska were 60 percent higher than the average in the comparison states, according to the health commission’s study, which was done by Milliman Inc., a consulting firm.

Perdue said these comparisons must be viewed in relation to other costs in Alaska. For example, the general cost of living is 30 percent over that in the six states used for comparison, she said.

The cost of construction of medical facilities is significantly higher in Alaska, along with utility costs. For rural hospitals and clinics the cost of travel for technicians maintaining equipment imposes a heavy burden, Perdue said.

There are also changing demographics. Alaska is still a young state compared with other states but the population of senior citizens, who typically require more care, is increasing. Also, obesity in Alaska is increasing, as it is in other states. Obesity is linked to a variety of health problems including diabetes and cardiopulmonary diseases.